In many corners of the internet, intraday trading and day trading have become confused. I’m here to clear it up. But first, I want to tell you that, yes, intraday trading strategies can absolutely result in profits. In fact, I’ve used them numerous times.
What’s important to understand is that intraday trading is much different from long-term investing.
- Investing: Buying and holding securities for a long period of time to collect dividends, interest, and an eventual payout.
- Trading: Taking advantages of fluctuations in the market to generate fast income via stocks and securities.
The distinction might seem picky, but it’s actually important.
Intraday and day trading strategies require close attention to technical analysis as well as an understanding of how news and catalysts impact stock price movements. Without those assets, you’re better off sticking to investing.
However, if you’re willing to learn the intricacies of intraday trading strategies, you can rack up profits quickly and consistently. Here’s how.
1. What Is Intraday Trading?
Intraday trading is the practice of trading stocks over a short period of time, such as between five and 14 days. You buy the stock, then wait until the pattern plays out. When you reach your risk tolerance level, you sell for a profit.
You can also short with intraday trading strategies. If you believe a stock will decline in price, shorting it allows you to take a profit on the downside. In this scenario, you borrow a certain number of shares from your broker, then sell them. When the price declines, you buy back the stock, return the appropriate shares to your broker, and profit the difference.
Either way, intraday trading strategies can make your stock market activities more exciting and allow you to generate more income from trading.
What Intraday Trading Strategies Exist?
The most important thing to consider when designing intraday trading strategies is momentum. If a stock isn’t moving steadily in one direction or another, it’s not worth buying or shorting.
Think of stock price movements as the price of a product on eBay. You found a collector’s item at a flea market or garage sale for $10 and sell it on eBay for $100. That’s a huge profit because of price movement.
When you see lots of price momentum, you can capitalize on it for big gains in a short period of time. However, you want to partner your technical analysis with fundamentals.
What catalyst is causing the stock price to trend in one particular direction? What information has been released that is causing more volume?
If you can pair consistent stock price movements with a fundamental catalyst, you can find a winner.
One of the most popular intraday trading strategies is to look for repeating bear and bull flags. The stock price hovers between support and resistance for a specific period of time, then shoots in one direction or another. If it goes up, it’s a bull flag; if it goes down, it’s a bear flag.
When these flags repeat, you can expect them to do it again. However, you want to get in when the price is close to either support (for a bull flag) or resistance (for a bear flag). That way, you reap maximum profits.
Is Intraday Trading Risky?
Some people consider intraday trading strategies extremely risky. They are — but only to a point. If you’re willing to study the market and if you can recognize familiar patterns, you assume less risk.
Every trade or investment in the stock market comes with some degree of risk. The more knowledge you have — or the more you rely on a mentor — the less risk you assume.
For instance, if you’re a member of one of the D.R. Barton publications, which are part of my brand, I take the difficulty out of intraday trading strategies, day trading strategies, and other stock market plays. That way, you can profit without all the research.
What Is the Difference Between Intraday Trading and Day Trading?
Day trading and intraday trading are two different approaches to the stock market, but they’re based on similar psychological principles. Day trading means that you enter and exit a trade in a single day. In other words, you enter after the market opens in the morning and exit before the market closes.
Some day trading strategies involve executing trades that only last minutes or hours. You’re taking advantage of small profits that you replicate over and over again.
Intraday trading strategies offer the potential for more profit because you’re holding your shares for longer periods of time. If you predict that a stock will climb steadily over several days, with occasional dips, you can buy and hold until the optimal moment.
How Can You Increase Your Chances of Profiting From Intraday Trading?
If you want to profit from intraday trading strategies, you need a very specific setup. Whether you prefer technical or fundamental analysis, make sure you pay attention to both. If nothing else, you can combine stock charts with Google Alerts to make sure you have access to breaking news.
Get to know your charts as well as possible. As I have, you might want to identify your own patterns as they begin to emerge. History repeats itself in the stock market — not always, but frequently — so you can rely on those charts to make better trades.
Intraday trading strategies aren’t for everyone. Some people prefer to day trade, while others like the relative security of online investing. You won’t know if you enjoy intraday trading, however, unless you try it out.
For guidance and support as you learn the stock market, sign up to learn about day trading strategies through my Stealth Profits Trader publication. I demystify the process and help you make profitable trades without all the legwork.